Symbolism vs Substance

Dr. Jayaprakash Narayan proposes seven broad approaches to promote inclusive growth in the next decade. He believes India has the technology, resources and cumulative knowledge to make every Indian a productive member of a modern economy. But what is needed is an honest and robust approach in place of symbolism, hypocrisy and short-term populism, he says.

For long, India was handicapped by the “Hindu rate of growth” of about 3% per annum. Much of the West saw a post war economic boom. As Asia, Japan, Korea, Taiwan and Singapore showed remarkable dynamism and their growth rate grew spectacular, in three decades their prosperity levels matched the rich countries of the West. Since 1980’s, China, the sleeping giant, suddenly woke up and recorded sustained high economic growth unprecedented in human history, and lifted the largest number of people out of poverty and created tens of millions of new jobs.

Poverty reduction a must for inclusive growth India recorded impressive growth rates for a decade, but over the past three years, this growth is faltering. It was clearly evident during the boom years that large sections of the population were not benefiting significantly from the economic growth. Growth tends to enhance the prosperity of those who are already productive participants of growing sectors of the economy, and those who acquired the skills or have the capital to enter those sectors. Growth bypasses large sections which have been denied skills, capital, market access and technology. In particular, people who have no basic amenities and services and live lives of drudgery in quiet desperation are far removed from the modern economy and continue to be burdened by abject poverty and deprivation.

Since 1991, the mantra of ‘Inclusive Growth’ has been repeated ad infinitum and many programmes have been launched to reduce poverty and promote economic inclusion. For decades in the pre-liberalisation era, we had many antipoverty programmes. But most of them were symbolic and hardly made a dent in poverty. Over the past two decades, more rapid economic growth gave us greater opportunity and more tools to attack poverty and promote inclusion. For instance, many flagship programmes have been launched with the primary objective of transferring the fruits of development and economic opportunities to the poor. The Planning Commission’s approach paper to the Twelfth Five Year Plan documents 13 flagship development programmes covering many sectors – rural employment guarantee, housing, roads, direct assistance to the poor, health, education, child nutrition, urban development, irrigation, rural electrification, drinking water and agriculture. In 2011-12, about Rs. 188,000 cr was spent on these schemes and the total 11th plan expenditure was about Rs. 700,000 cr. All these and other interventions since 1980’s along with higher growth rates have reduced the burden of poverty to some extent.

Upto 1980, our annual growth rate was about 3.2%, and per capita growth rate was a mere 1%. Since then, per capita growth rates picked up, registering 2.3% during 1981-88; 3.8% during 1988-2003 and 6.6% during 2003-12. These higher growth rates enhanced incomes and created more jobs reducing poverty. Equally significant, higher growth gave government more revenues and greater borrowing capacity, and more resources could be deployed for anti-poverty programmes. As a result, since 1980’s, poverty levels began to decline. During the era of economic stagnation until 1977, our poverty levels were very high – 50% to 60% – and there was no decline. By 1993-94, about 36% people remained poor. By 2004-05, this ratio declined to 27% – a drop of 9% in 11 years. Over the next five years, poverty levels dropped by another 7%. The evidence that higher growth reduces poverty is compelling and conclusive. True, the poverty line itself is low and is drawn at subsistence level. What it means is India should achieve much higher levels of prosperity by sustained high growth rates for decades more. Only then can we move from subsistence to plenty. But for measuring trends of poverty, as explained by Jagdish Bhagwati and Arvind Panagariya (Why Growth Matters: 2013), we need a uniform poverty line, and the evidence clearly shows that poverty declined much more significantly over the past two decades than ever before.

But a lot more remains to be done. Our poverty line is still too low, and as a nation we should aspire for a much higher quality of life for our poorest people. In addition, with population still growing fast, the absolute numbers who remain poor are staggering. In our population of about 127 crore, about 30 crore people are abjectly poor, measured by even a low standard of subsistence. Clearly, we need to do a great deal more to promote growth and lift hundreds of millions of our people out of poverty.

The Planning Commission (Twelfth Plan) argues that inclusive growth should result in lower incidence of poverty, better access to healthcare and education, higher wage employment and livelihood, and improvement in basic amenities – water, electricity, roads, sanitation and housing. The sad reality is governments have consistently failed in delivery of healthcare, education and basic amenities, and our growth has not created enough wage employment. India’s public expenditure on health is only about 1% GDP, and is among the lowest in the world, in the sad company of Nigeria, Sudan, and Burma. Poor healthcare is imposing a huge burden of preventable diseases on the poor, and escalating costs of healthcare is leading to greater poverty, and indebtedness, apart from loss of wages and time. Some studies show that 40% of those hospitalised in India are forced to sell their assets, or borrow at usurious rates, and as a result, 25% of them descend into poverty.

Education outcome low, grim future for children

Similarly, the government’s failure in education is staggering. Undoubtedly enrolment in schools has improved dramatically in the past decade, and more children are now enrolled in schools. But the educational outcomes are appallingly low, and such poor schooling has no real impact on poverty or quality of life. Pratham’s ASER (Annual Status of Education Reports) reports show that even in 7th grade, about 30% children cannot do a simple subtraction, and about 60% children cannot do a division. The PISA (Programme for International Students’ Assessment) survey of 2009 covering 74 rich nations as well as emerging economies measured educational outcomes – communication skills, application of simple math, and logic – at the age of 15. India was ranked an appalling 73rd, with only Kyrgyzstan ranking lower than India! China ranked first in this survey. Even adjusting the unfamiliarity of Indian children with the testing methods, our educational outcomes are abysmally low. Even a casual acquaintance with the quality of education imparted in most government and private schools reveals how millions of our children are deprived of the benefit of empowerment through education. The Right to Education Act only focuses on enrolment, while completely ignoring outcomes, and thus condemns tens of millions of poor children to poor education and a life of poverty only because of the accident of birth.

Infrastructure development too symbolic to be true

A lot has been written about lack of access to potable water and sanitation. The recent rhetoric of politicians that we need more toilets and not temples is a welcome change in terms of debate, if only we are willing to act on these beliefs. Even today too many households have no access to electricity, and what is worse, except in a few pockets of India, 24-hour power is beyond the dreams of village India. It is a folly to dream of productive employment for the poor in this day and age without access to power and modern machines. The palliatives like MGNREGA certainly put some money into poor people’s pockets and are welcome to that extent, but it is the height of hypocrisy to pretend that digging pits and filling ditches constitute real employment or eliminates poverty in the 21st century. Housing certainly gives boost to the economy, creates employment, and gives a vital asset and security to the poor. But our public housing programme, particularly in urban areas, is too small and too symbolic to make any significant dent in poverty or promote inclusive growth.

Economic growth has not guaranteed employment

Poor education and skills, inadequate infrastructure, monumental corruption, confused policy, tardy implementation, and extremely regressive labour laws – all these resulted in jobless growth in India. While agriculture accounts for only about 17% of GDP, it still accounts for nearly 55% of all employment. Industry of all kinds – including tiny, unorganised units – account for only 18% of our work force, and services sector accounts for 27% of the workers. In the organised sector, especially in manufacturing, growth of employment is marginal at best. Only 8% of India’s workers are in the organised sector, of whom nearly 60% are in government and public sector. An economy that cannot create jobs will condemn millions into poverty and penury.

Seven steps to inclusive growth

What, then can be done to promote inclusive growth and help the poor out of poverty? Can we really create a climate in which all Indians improve their quality of life? Can we end poverty and deprivation at least in the next decade, and make every Indian a productive member of a modern economy. The answer is a resounding YES. We have the technology and resources to make it happen; and we have the cumulative knowledge in India and world over to understand the best strategies and policies to end poverty and promote employment. But we need an honest and robust approach in place of symbolism, hypocrisy and short term populism at the cost of long term public good. There are seven broad approaches we need to follow.

Basic amenities: First, the government should focus on basic amenities in a responsible way. Mythical targets and allocations will not do. For instance, water distribution in our cities, and power distribution all over are in disrepair, leading to leakages, corruption and losses. Sensible power distribution management, proper metering and energy audit, separation of agricultural transformers and other steps can guarantee 24-hour power and boost production, investment and employment. Rural property, employment generation, poverty reduction, and economic growth – all depend on assured water, power and basic amenities.

Ensuring quality of service on time: Second, the poor do not get even the most basic services from government offices or public utilities. For even a birth certificate, ration card, or to obtain a land record, or to get a water connection or power connection, the poor have to wait for months and face harassment, humiliation, indignity and corruption. This perpetuates a cycle of poverty by sucking up resources and time, undermining people’s morale, and denying them access to services and opportunities. A service guarantee law specifying the quality of service and timelines, and ensuring compensation for delays must be enacted forthwith (A Bill is now before Parliament), and enforced rigorously. This will liberate the bulk of the poor, and will allow them to enter the labour market or become entrepreneurs in their own right to pursue a better life.

Stimulate rural economy and livelihoods: Third, the productive potential of the rural and agricultural population must be unleashed by sensible policies and incentives. Unjust and irrational trade barriers, lack of access to markets, unregulated imports without stimulus to domestic production where there are shortages, absence of proper supply chain and logistics – all these lead to low prices at the farm gate and high price to the consumers. On an average, the farmer gets only 35% of the end price to the consumer. Out of the more than 160 million tonnes of fruits and vegetables produced, only 2% is processed. Upto 30% of perishable commodities are wasted. The economic distance between agriculture and industry; and between villages and cities, is growing dramatically. Gross capital formation in agriculture, which stood at 4.5% of GDP in the decade upto 1991, has now fallen to half that level, even as the majority of the population still depends on agriculture. Removal of trading barriers within the country, a boost to exports of agricultural products when they are competitive, a moderate import duty of 15-20% on import of pulses and cooking oil and corresponding stimulus to indigenous production, modernisation and democratisation of markets, improvement of storage, grading, transport and processing, and compression of market chain to minimise distance between the producer and consumer are the ways forward. These steps will dramatically increase farmers’ incomes, contain food inflation, promote diversification, boost capital formation and significantly stimulate rural economy and livelihoods. Simultaneously, if most of the money deployed in rural India, for example MGNREGA, is utilised for water harvesting and soil conservation, the resource base will improve and productivity and incomes will rise. Sadly, most of the public money spent, even when there is no corruption, has only given temporary relief to the poor, but has not given them the capacity to come out of poverty. The government is too busy giving the hungry man a fish meal, instead of teaching him how to fish and giving fishing gear!

Restructure poverty reduction programmes: Fourth, the government anti-poverty programmes need to be radically restructured to yield desired benefits. The Food Security Act (FSA) enacted with much fanfare is a case in point. When 3% people are starving, 70% people are sought to be given food grains in government-run, inefficient, corrupt fair price shops (FPS), 40% or more of PDS (Public Distribution System) grains are recycled and sold to FCI again; a FPS dealer’s appointment is made for a bribe of Rs. 2-3 lakh; and a civil supplies official’s posting costs millions!…poverty alleviation seems to be a distant dream. If the truly starving 10-15% population is identified, and direct transfer of money is made to them in the form of food stamps, food will actually reach the poor, since food market works and food is accessible everywhere in the country. The problem is affordability, and not access, and yet the government creates a vast, corrupt machinery to improve distribution! Most government expenditure for the poor has become wasteful, and poverty is perpetuated.

Better education and healthcare: Fifth, education and healthcare need to be dramatically improved by innovative mechanisms and public-private participation and sensible incentives. The focus should be on measurable outcomes instead of symbolic, but futile entitlements. Happily, for both, the demand side is very strong, and private sector is entering in a big way to meet the demand. In the absence of sensible, enabling public policy and partnership, the costs are escalating, outcomes are ineffective, and the poor are left at the mercy of market forces. Charter schools and per-capita grants based on outcomes, and NHS (National Health Service)-like family and secondary healthcare system with public funding are eminently feasible in India. We have the basic ingredients, and all it needs is firm public policy backed by workable design and resources. War-torn Britain could build a world-class NHS in 1948, when they had few resources and limited technology. With political will and competence, we can easily ensure quality education and healthcare to every poor family in India.

Boost employment rate: Sixth, promotion of skills, job creation, infrastructure, investment-friendly climate, sensible labour laws to promote labour-intensive industries, and a fair, non-corrupt regulatory regime to boost production and employment should be at the heart of our anti-poverty and economic growth strategies.

Access to capital and security: Finally, the poor require access to capital and security. A massive public housing programme, titles to land with proper homestead legislation, promotion of a large number of small towns through infrastructure and in-situ urbanisation and accessible banking and financial inclusion will unlock the assets and boost investment and employment. The poor must be looked upto as entrepreneurs and investors, and not looked down upon as mendicants and a problem.

Modern technology, resources and successful best practices have given us a priceless opportunity to promote inclusive growth and end poverty. But shibboleths must give way to purposive, well-coordinated action, and symbolism must be replaced by substance. If we summon the will, we can unlock the energies of the poor, and help fulfil the enormous human potential hitherto neglected, and eliminate vast avoidable suffering of tens of millions of the victims of poor governance and irrational policies and programmes.

Dr. Jayaprakash Narayan

The author is the founder and President of Lok Satta Party – new politics for the new generation; Email: info@loksattaparty.com; Url: www.loksatta.org

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